Dec. 28, 2020 Top Five Legal Changes and New Compliance Obligations for California Employers In The New Year

As employers rush to complete their year-end work, we offer this brief reminder of the most notable new California employment laws taking effect in the new year, some of which may require changes to existing policies or practices.

Minimum Wage & Minimum Salary Requirements for Overtime Exemptions Are Increasing

On January 1, 2021, California’s minimum wage increases to $14 per hour (for employers with 26 or more employees) and $13 per hour (for employers with 25 or fewer employees). Multiple local minimum wage ordinances are also increasing on January 1, including the City of San Diego’s, which will require all employees working within the city limits be paid at least $14 per hour, regardless of employer size. 

The increase in the minimum wage also impacts the minimum salary required for California employees to be classified as exempt from overtime under the state’s white-collar exemptions. Beginning January 1, employers with 26 or more employees must pay their employees at least $58,240 per year in order to satisfy the salary basis part of the white collar exemption tests.  

In addition, the minimum hourly and salary requirements for California’s computer software exemption are also increasing. Beginning January 1, computer software employees must either be paid an hourly rate of at least $47.48 or a minimum salary of $98,907.70 per year to potentially be exempt from overtime.

Employee Leave Rights under the CFRA Are Expanding

On January 1, the California Family Rights Act (CFRA), which provides employees up to 12 weeks of unpaid, job protected leave to bond with a new child or care for themselves or a family member with a serious health condition, will be significantly expanded to:

  • apply to employers with five or more employees;
  • provide new leave rights to care for additional family members, including siblings, grandparents, and adult children; and
  • provide new leave rights for certain “military exigencies” related to active duty, or a call to active duty, of the employee’s spouse, domestic partner, child, or parent. 

Although a qualifying “military exigency” is not defined in the CFRA, the law will likely incorporate the Family and Medical Leave Act’s (FMLA’s) definition, which would include certain short-notice deployments, military events and related activities, taking care of child care and school needs, making financial and legal arrangements, attending family counseling, and other activities arising out of a military members’ active duty or call to active duty.

The revised CFRA also enhances leave rights for parents who both work for the same employer and removes pre-existing limitations on benefits to “key employees.” In addition, due to the way the newly expanded CFRA was written, when an employee is covered by both the FMLA and CFRA, there may be situations where they are entitled to up to 24 weeks of job-protected leave in the same year.

For a more detailed description of changes to the CFRA, see our previous E-Update on the revised law.

New Pay Data Reporting Obligations Are Coming

Newly enacted S.B. 973 requires large California employers to begin reporting pay and hours-worked data by job category, as well as by sex, race, and ethnicity (“pay data”) to the Department of Fair Employment and Housing (DFEH) by March 31, 2021.   

The new pay data reporting requirement applies to all California entities that:

        (1) are private employers with any California employees in 2020; and

        (2) regularly employed at least 100 employees anywhere in the U.S. during 2020 (or employed 100 employees in the U.S. during a “snapshot period”) and

        (3) are already subject to the federal EEO-1 reporting requirement.

For purposes of counting 100 employees in the U.S. under this test, part-time employees and employees on paid or unpaid leaves of absence are included. However, contractors and temporary workers not on the entity’s payroll (e.g., workers from staffing companies) are excluded.  

The DFEH has not yet published specific instructions on the manner in which the data must be reported or the reporting system that will be used, although it will likely mimic the EEOC’s previous EEO-1 reporting structure. 

New Mandates for Public Company Diversity Are Going Into Effect

Under the provisions of newly-enacted A.B. 979, public companies with executive offices in California must meet new diversity requirements by appointing directors from “underrepresented communities” to their boards, or face steep fines of $100,000 or more. The law defines a director from an “underrepresented community” as an individual who “self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or who self identifies as gay, lesbian, bisexual, or transgender.” These diversity requirements are being phased in over time:

  • By December 31, 2021, all California public companies must have at least one diverse director.
  • By December 31, 2022, public companies with between five and eight board members must have at least two diverse directors; and public companies with nine or more directors on their boards must have at least three diverse directors.

In addition, beginning no later than March 1, 2022, the California Secretary of State will publish annual reports on its website regarding compliance with the new requirements.

This new law is currently the subject of a constitutional challenge, but the court has not issued an injunction halting its enforcement, thus its requirements will still take effect at year end.

Human Resources Personnel and Certain Supervisors Will Be Deemed “Mandatory Reporters” of Suspected Child Abuse

Beginning January 1, 2021, human resources employees and certain supervisors of entities that employ five or more employees and also employ minors, are required to report suspected child abuse or neglect to law enforcement authorities. Human resources employees are those persons designated by the employer to accept complaints of discrimination, harassment, retaliation and certain other violations of the California Fair Employment and Housing Act. Covered supervisors are those supervisors whose duties require contact with, and supervision of, minors.

Employees with mandatory reporting obligations must also be provided training on their new obligations and how to identify child abuse and neglect. The employer’s training obligation may be met by providing covered employees with free online training modules offered by the Office of Child Abuse Prevention in the State Department of Social Services.

What This Means

California employers are used to implementing new laws from Sacramento at the start of each year. 2021 will be no different, yet this new year already holds a host of ongoing challenges and legal complexities surrounding the COVID-19 pandemic. If you would like further information or assistance in preparing for the above-described legal changes, or a complete list of all state and federal employment laws passed in 2020, please contact a PPSC lawyer via our website, or any of the authors listed below.


Denise Brucker   joe Connaughton   Kelly Kagan